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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
(Mark One):
|X| Annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934 (No Fee Required)
For the fiscal year ended December 31, 2002
OR
|_| Transition report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
For the transition period from to
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Commission file number: 1-11083
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Boston Scientific Corporation
401(k) Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
Boston Scientific Corporation
One Boston Scientific Place
Natick, MA 01760-1537
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AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
BOSTON SCIENTIFIC CORPORATION
401(K) RETIREMENT SAVINGS PLAN
YEAR ENDED DECEMBER 31, 2002
BOSTON SCIENTIFIC CORPORATION 401(K) RETIREMENT SAVINGS PLAN
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
YEAR ENDED DECEMBER 31, 2002
CONTENTS
Report of Ernst & Young LLP, Independent Auditors.......................... 1
AUDITED FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits....................... 2
Statement of Changes in Net Assets Available for Plan Benefits............. 3
Notes to Financial Statements.............................................. 4
SUPPLEMENTAL SCHEDULE
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)............. 9
Report of Ernst & Young LLP, Independent Auditors
401(k) Plan Administration and Investment Committee and Participants
Boston Scientific Corporation 401(k) Retirement Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of the Boston Scientific Corporation 401(k) Retirement Savings Plan
(the Plan) as of December 31, 2002 and 2001, and the related statement of
changes in net assets available for plan benefits for the year ended December
31, 2002. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for plan
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
assets (held at end of year) as of December 31, 2002, is presented for purposes
of additional analysis and is not a required part of the financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Boston, Massachusetts
April 22, 2003
1
Boston Scientific Corporation 401(k) Retirement Savings Plan
Statements of Net Assets Available for Plan Benefits
DECEMBER 31
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2002 2001
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ASSETS
Investments $328,424,527 $285,569,203
Receivables:
Participant contributions 857,790 785,529
Employer contribution 1,899,792 1,438,809
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Total receivables 2,757,582 2,224,338
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Net assets available for plan benefits $331,182,109 $287,793,541
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
2
Boston Scientific Corporation 401(k) Retirement Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year Ended December 31, 2002
Additions to net assets attributed to:
Investment Income:
Interest $ 2,203,419
Dividends 2,832,564
Net appreciation in fair value of investments 16,492,928
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21,528,911
Contributions:
Participants 32,039,637
Employer 12,891,578
Participant Rollovers 2,536,227
Transfer of funds from other 401(k) plans 3,679,155
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51,146,597
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Total additions 72,675,508
Deductions from net assets attributed to:
Benefits paid to participants 29,205,540
Service fees 81,400
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Total deductions 29,286,940
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Net increase 43,388,568
Net assets available for plan benefits:
Beginning of year 287,793,541
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End of year $331,182,109
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
3
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes To Financial Statements
December 31, 2002
1. DESCRIPTION OF THE PLAN
The following description of the Boston Scientific Corporation (the Company)
401(k) Retirement Savings Plan (the Plan) provides only general information.
Participants should refer to the Summary Plan Description and the Plan for a
more complete description of the Plan's provisions, including defined terms.
Copies are available from the 401(k) Plan Administration and Investment
Committee (the Committee).
GENERAL
The Plan is a defined contribution plan covering all eligible employees who have
completed thirty days of service and have attained twenty-one years of age. It
is subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
During 2002, assets totaling $3,679,155 from four Company acquisitions made
during 2001 were merged into the Plan.
Interventional Technologies, Inc. 401(k) Plan $2,878,310
RadioTherapeutics Corporation 401(k) Plan 483,160
Catheter Innovations, Inc. 401(k)
Retirement Savings Plan 237,683
Quanam Medical Corporation 401(k) Plan 80,002
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$3,679,155
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CONTRIBUTIONS
A participant may contribute between 1% and 15% of his or her pre-tax annual
compensation, as defined in the Plan document, up to established federal limits.
In addition, a participant may contribute between 1% and 10% of his or her
compensation on an after-tax basis each year. Effective January 1, 2003, the
Plan was amended to allow non-highly compensated employees, to contribute
between 1% and 25% of his or her annual pre-tax compensation.
The Company's matching contribution shall be equal to (i) 100% of the elective
pre-tax contributions made on behalf of the participant for the period which do
not exceed 2% of the participant's compensation for such period, plus (ii) 50%
of the elective pre-tax contributions made on behalf of the participant for the
period which exceed 2% but do not exceed 4% of the participant's compensation.
The Plan also provides for an investment fund to hold shares of Pfizer Inc.
(Pfizer) common stock transferred from the Pfizer Savings and Investment Plan
for former Schneider employees. The Company acquired Schneider Worldwide in
September 1998. No contributions can be made to this fund and any earnings on
this fund will be allocated to a participant's current investment elections
under the Plan. A participant can transfer amounts out of the Pfizer stock fund
to other investment funds within the Plan.
4
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes To Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
At the discretion of the Board of Directors of the Company, the Company may make
an additional discretionary contribution. Employees with three of more years of
credited service on December 31, 1992 will be fully vested in such amounts and
all other employees will become fully vested in such amounts after five years of
credited service (20% vesting after each year). No additional discretionary
contribution was made in 2002.
PARTICIPANT ACCOUNTS AND VESTING
A participant can allocate his or her account among various investment funds.
Each participant's account is credited with the participant's contribution, the
Company's contribution and an allocation of Plan earnings. Each participant is
fully vested in his or her account, except as discussed above regarding
discretionary contributions. The benefit to which a participant is entitled is
the benefit included in the participant's account.
PARTICIPANT LOANS
A participant may borrow from his or her account a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of his or her account
balance. Loan terms range up to 5 years or up to 10 years for the purchase of a
primary residence. However, participants of the defined contribution plans of
acquired companies may retain the loan terms granted under their former plans.
Loans are secured by the balance in the participant's account and bear interest
at a rate commensurate with local prevailing rates as determined by the
Committee. Principal and interest are repaid ratably through payroll deductions.
PAYMENT OF BENEFITS Upon termination of service, a participant receives a
lump-sum amount equal to the value of his or her account. Effective May 1, 2002,
the Plan no longer allows annuity and installment forms of distributions for
participants who terminated employment on or after May 1, 2002 or terminated
their employment before May 1, 2002, but had not yet begun receiving their Plan
benefits by that date. If a terminated participant's account is valued at and
remains in excess of $5,000 (minus any rollover amounts), he or she has the
option of leaving the funds invested in the Plan until attaining the age of 62.
While employed at the Company, a participant may withdraw all or a portion of
his or her 401(k) account to the extent necessary to meet a financial hardship,
as defined in the Plan.
The Plan also allows withdrawals from after-tax and rollover accounts, for any
reason, and allows disabled participants, as defined in the Company's group
long-term disability contract, to take withdrawals at any time regardless of
age. Participants may also make withdrawals for any reason after attaining age
59 1/2.
5
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes To Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting records of the Plan are maintained on the accrual basis.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of registered investment
companies are valued at quoted market prices, which represent the net asset
value of shares held by the Plan at year-end. Units of the Retirement Savings
Trust are valued at net asset value at year-end. Securities listed on a
registered stock exchange are valued by the Plan Administrator at the last
reported sales price on the last business day of the Plan year. Participant
notes receivable are valued at cost, which approximates fair value.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is accrued when earned. Dividend income is recorded on the ex-dividend
date. Capital gain distributions are included in dividend income.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of additions and deductions during the reporting period.
Actual results could differ from these estimates.
6
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes To Financial Statements (continued)
3. INVESTMENTS
The following investments represent 5 percent or more of the Plan's net assets.
DECEMBER 31,
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2002 2001
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Boston Scientific Corporation Common Stock Fund $125,927,566 $ 77,771,753
Vanguard 500 Index Fund 45,208,343 52,724,101
Vanguard U.S. Growth Fund 25,837,900 37,240,298
Vanguard Retirement Savings Trust 39,867,734 24,363,100
Pfizer Common Stock -- 23,376,027
Vanguard Wellington Fund 21,594,882 19,508,308
During 2002, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$16,492,928 as follows:
Mutual funds $(37,575,587)
Common stock 54,068,515
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$ 16,492,928
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4. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan invests in shares of mutual funds managed by an affiliate of Vanguard
Fiduciary Trust Company (Vanguard). Vanguard acts as trustee for only those
investments as defined by the Plan. Transactions in such investments qualify as
party-in-interest transactions, which are exempt from the prohibited transaction
rules.
Fees for legal, accounting and other services rendered during the year by
parties-in-interest were paid by the Company.
7
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes To Financial Statements (continued)
5. INCOME TAX STATUS
During 2002, the Plan was amended and restated effective January 1, 2001. The
Plan has received a determination letter from the Internal Revenue Service dated
March 4, 2002, stating that the Plan is qualified under Section 401(a) of the
Internal Revenue Code (the Code) and, therefore, the related trust is exempt
from taxation. Once qualified, the Plan is required to operate in conformity
with the Code to maintain its qualification. The Plan Sponsor has indicated that
it will take the necessary steps, if any, to maintain the Plan's qualified
status.
6. SUBSEQUENT EVENT
Subsequent to year-end, assets totaling $144,052 from a Company acquisition made
during 2002 were merged into the Plan.
8
Boston Scientific Corporation 401(k) Retirement Savings Plan
EIN #04-2695240
Plan #001
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
Current
Identity of Issue Shares or Units Value
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INVESCO:
Dynamics Fund 717,875 $ 7,652,546
* Vanguard Group:
500 Index Fund 557,096 45,208,343
Total Bond Market Index Fund 1,372,792 14,249,585
International Growth Fund 1,041,422 12,663,686
U.S. Growth Fund 2,142,446 25,837,900
Wellington Fund 879,270 21,594,882
Windsor II Fund 563,768 11,726,370
Retirement Savings Trust 39,867,734 39,867,734
* Boston Scientific Corporation Common Stock Fund 2,961,608 125,927,566
Pfizer Common Stock Fund 471,782 14,422,381
T. Rowe Small-Cap Stock Fund-Advisor Class 16,196 347,249
* Participants' notes receivable 5.25% - 10.75% 8,926,285
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$328,424,527
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* Indicates party-in-interest to the Plan.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustee (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Boston Scientific Corporation
401(k) Retirement Savings Plan
Date: June 30, 2003 By: /s/ Lawrence C. Best
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Lawrence C. Best
Member, 401(k) Plan Administration
and Investment Committee